The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

by Dave Ramsey

"As lost as a ball in tall weeds!" That is exactly how I felt. Although it was twenty years ago, I can still taste the emotion as if it were yesterday. Out of control, lost, no sense of power, I felt dread creep across the room like the afternoon shadows on a cold winter's day. Sitting again at the kitchen table with too much month left at the end of the money, I was not having fun. This "adult" stuff where a wife looks to you to provide and kids expect to be fed and kept warm was not exactly working. I didn't feel like some powerful adult; instead, there was a little boy inside me who was very afraid-afraid of this month's bills, afraid of this month's mortgage, and absolutely terrified when I considered the future. How was I to send kids to college, retire, enjoy life, and not live at the edge of money worries

The "Normal" American Family

It seemed every month I sat at that same table with the same worries, fears, and problems. I had too much debt, too little savings, and no sense of control over my life. No matter how hard I worked, it seemed I couldn't win. I was to forever be slave to some banker, to the government, and to the "needs" of my family. When Sharon and I "talked" about money, we ended up in a fight, leaving her feeling afraid and me feeling inadequate. The next car purchase, the next house, the kids' college-our entire future seemed out of reach.

I didn't need a get-rich-quick guy to pump me up or tell me to be positive. I didn't need a secret formula to riches. I wasn't afraid of hard work or sacrifice. I didn't want to "feel" my way into being "positive." I was positive of only one thing: I was sick and tired of being sick and tired. I was tired of sitting down to "do the bills" and having a heaviness come over me. The hopelessness was overwhelming. I felt like a gerbil in a wheel-run, run, run, no traction, no ground covered; maybe life was just a financial illusion. All the money came in, all the money went out, and only the names were changed to protect the innocent. I owe, I owe, so off to work I go. You know the drill and all the clichés that go with the drill.

Oh, some months everything seemed to work, and I thought maybe we were going to be okay. I could tell myself then, "Oh well, this is how everyone lives." Those times offered enough wiggle room that I could continue to lie to myself that we were making headway, but deep down, I knew we weren't.

I Did It My Way, and My Way Wasn't Working

ENOUGH! THIS STINKS! I finally decided that this nonplan wasn't working. If you have ever had any of those feelings, you are going to love this book, and, more important, you will love your Total Money Makeover.

More than 20 years ago, my wife, Sharon, and I went broke. We lost everything due to my stupidity in handling money, or not handling it, as the case may be. Hitting bottom and hitting it hard was the worst thing that ever happened to me and the best thing that ever happened to me.

We started with nothing, but by the time I was twenty-six years old, we held real estate worth over $4 million. I was good at real estate, but I was better at borrowing money. Even though I had become a millionaire, I had built a house of cards. The short version of the story is that we went through financial hell and lost everything over a three-year period of time. We were sued, foreclosed on, and, finally, with a brand-new baby and a toddler, we were bankrupt. Scared doesn't begin to cover it. Crushed comes close, but we held on to each other and decided we needed a change.

So after losing everything, I went on a quest, a quest to find out how money really works, how I could get control of it, and how I could have confidence in handling it. I read everything I could get my hands on. I interviewed older rich people, people who made money and kept it. That quest led me to a really, really uncomfortable place-my mirror. I came to realize that my money problems, worries, and shortages largely began and ended with the person in my mirror. I realized also that if I could learn to manage the character I shaved with every morning, I could win at money. That quest, the one that ended with me staring at myself in the mirror, led me on a new journey over the last twenty years: the journey of helping others, literally millions of others, take that same quest to the mirror. Live Events, Financial Peace University, The Dave Ramsey Show (talk radio and TV show), and the New York Times best-sellers Financial Peace, More Than Enough, and The Total Money Makeover have enabled me to tell millions of Americans what I have learned-the hard way-about money.

The Big Challenge: Find a Mirror

I have a challenge for you. Are you ready to take on the guy or gal in your mirror If you are, you are ready to win. I rediscovered God's and Grandma's simple way of handling money. Wealth building isn't rocket science, which is a good thing for me (and probably you). Winning at money is 80 percent behavior and 20 percent head knowledge. What to do isn't the problem; doing it is. Most of us know what to do, but we just don't do it. If I can control the guy in the mirror, I can be skinny and rich. We will let other books work on the skinny, and I will help you with the rich part. No, there are no secrets, and yes, this will be very hard. Hey, if it were easy, every moron walking would be wealthy.

So my Total Money Makeover begins with a challenge. The challenge is you. You are the problem with your money. The financial channel or some DVD sets aren't your answer; you are. You are the king of your future, and I have a plan. The Total Money Makeover plan isn't theory. It works every single time. It works because it is simple. It works because it gets to the heart of your money problems: you. It is based on a series of prices that must be paid to win. All winners pay a price to win. Some losers pay a price and never win, and that is usually because they didn't have the benefit of a proven plan for financial fitness.

Ordinary People

Tens of thousands of ordinary people have used the system in this book to get out of debt, regain control, and build wealth. I've scattered their stories throughout the book. If at any point during your makeover you are tempted to quit or you just need a little encouragement, read one of these stories. These people have sacrificed for a short period of time so they will never have to sacrifice again.

If you are looking for a road map to get you home, you've found it. If you are looking for something easy or fast, you have the wrong book. If you are looking for a book to help you pass your CPA exam in the area of financial knowledge, you have the wrong book. If you are looking for a writer who has intricate academic theories (that don't work in the real world), you've got the wrong guy. I have many of the academic pedigrees, but I ended up broke. I have actually twice become a millionaire from nothing. The first time I was in my twenties, the money was in real estate, and I lost that due to my stupidity; the second time I was not yet forty, but I did the money thing right that time, and I am debt-free.

I often hear about broke finance professors who bemoan that I am way too simple, or as an e-mailer told me on The Dave Ramsey Show one day, "You are a one-trick pony." To those of you who say you have great but unexecuted plans, I say, "Prove it. I have." I like the way I've built wealth better than the way you haven't. You will meet people, educated and uneducated, throughout this book who have won, or begun to win, with money for the first time in their lives. The Total Money Makeover works!

The Total Money Makeover Motto

This plan works, but it will cost you. It will teach you to say new words, like "no." In short, your Total Money Makeover will be a personal money makeover where you learn this motto: IF YOU WILL LIVE LIKE NO ONE ELSE, LATER YOU CAN LIVE LIKE NO ONE ELSE. This is the motto of your Total Money Makeover. It's my way of reminding you that if you will make the sacrifices now that most people aren't willing to make, later on you will be able to live as those folks will never be able to live. You will notice the motto all through the book, even across the bottom of the pages. I'm sorry there isn't an easier path to feature in the motto, but the good thing about this one is that it works. You can repeat the motto to yourself as you pass up a purchase in order to hit your goals. When you work late and are tired, you can say the motto to yourself. Of course, this isn't a magic formula; I'm not into that. But it does remind you that you will win, and the payoff will be worth the cost.

Some of you are so immature that you are unwilling to delay pleasure for a greater result. I will show you exactly how to get the result you want, so the price you pay will not be in vain. I don't want to walk across hot coals because it is fun, but if I can be shown how a short, painful walk will do away with the lifetime of worry, frustration, stress, and fear that being constantly broke brings me, then bring on the hot coals.

My Promise to You

My promise to you is this: if you will follow the guidelines of this proven system of sacrifice and discipline, you can be debt-free, begin saving, and give as you've never given before. You will build wealth. I will also promise you that it is totally up to you. The Total Money Makeover isn't a magic formula to wealth. This system will not work unless you do, and then only to the degree of your intensity in implementing it. In the following pages, you will meet many individuals and families who have won many money victories, but not one of them won until they won the battle with the guy in the mirror. Your situation isn't your spouse's fault (well, maybe, but we'll talk later), it isn't your parents' fault, it isn't your children's fault, and it isn't your friends' fault. IT IS YOUR FAULT!

My financial life began turning around when I took responsibility for it. People all across America have used these steps to become free, regain a sense of confidence and control, and build a future for their families. Please join me on a journey away from the young man I was, the one I described earlier who was racked with worry, fear, and guilt over money. Take this journey with me to your own Total Money Makeover, but remember, the first part of the quest is confronting the man in the mirror. That man in the mirror is your Total Money Makeover Challenge.

Chapter Two

Denial: I'm Not That Out of Shape

Several years ago I realized I had let my body dissolve into flab. I had worked so hard for so many years that I had abandoned the care of my physical condition. The first step to getting into shape was to realize I needed to change my ways, but the second and equally important step was to identify the obstacles to getting there. What would stop me from getting into shape Once I understood those obstacles, I began a process to lose weight, grow muscle, and become more fit. Your Total Money Makeover is the same. You need to realize there's a problem, but you must also see what could hinder your move toward financial fitness. The next few chapters will identify some major obstacles to YOUR Total Money Makeover.

Look in the mirror. Take a long look. What do you see Suck in that gut; hold up your chest, and really look at yourself. It doesn't matter how many angles or poses you take, the mirror is cruel. "Well, I'm really not that fat, maybe just a little flabby." My dad used to say that 90 percent of solving a problem is realizing there is one. Focused intensity, life-or-death intensity, is required for you to reset your money-spending patterns, and one of your biggest obstacles is DENIAL. The sad thing is that you can be financially mediocre in this country, financially flabby, and still be average. And if the truth be known, being average, normal, and financially flabby is pretty much okay by most folks' standards. This, however, is not a book for the wimpy among us. This is a book about winning, about really having something.

Don't Wait to Have Denial Knocked Out of You

For several years I have spoken multiple times a year to live audiences of two thousand to twelve thousand people, teaching them the ideas this book. After one live event where I spoke to four thousand people, Sara told me that her Total Money Makeover came only after life placed a call to her. She said she had heard me quote the Wall Street Journal as reporting that 70 percent of Americans live paycheck to paycheck, but she honestly thought she was in the 30 percent who were fine. She had financially struck a pose, and the pose was denial.

With two sons from her previous marriage, Sara had just remarried and was happy and secure in her job, as was her husband, John. Their new life together seemed awesome. Their household combined income was about $75,000 per year, with the "normal" debts of a small student loan, a car loan, and "only" $5,000 on a credit card. With life under control and even going well, Sara and John decided their new family needed a new home, so the builder was selected and construction began. Somewhere deep inside there may have been uneasiness, but it was very deep. Finally the day came when the new home was complete. Everything was going to be fine now, the new family in the new home, the way it is "supposed" to be. In May they moved into the new home, complete with big new payments.

In September Sara's boss asked to see her in his office. She was excelling at work and braced herself for a big "atta, girl" followed by a nice bonus or raise. Instead, the boss explained her job was being eliminated. "Downsizing, you know," he said. Her life's work was cut from her-and $45,000 of their $75,000 income-with the boss's chilling words. Not only was her pride hurt and her career path cut short, a creeping terror grew deep down inside as she drove home to tell John. That night there were tears, fears, and the sudden stark realization that she and John were financially fat. Suddenly, Sara and her family were facing foreclosure on the house and repossession of the car. The basics of life had become precious.

Sara and John had listened to The Dave Ramsey Show on the radio, but they always thought someone else needed a Total Money Makeover. After all, they always held their stomachs in when standing in front of the mirror. The night after her layoff was the first night they looked in the financial mirror and saw fat people. The sight wasn't pretty-big house payments, fat car payments, large student loans, bloated credit cards, anorexic savings, and no budget. They saw fat people.

When you are physically fat, it is hard to be in denial, because there is the ever-widening belt line. When you are financially fat, however, you can fake it and look good for a while. Your friends and family will participate in your fantasy/denial, which makes you believe you are doing just fine. One of the four major factors that keep people from winning in money by getting a Total Money Makeover is not realizing they need one. Sadly, some of the most dramatic makeovers I've seen have been by people who had life smack them so hard they got the denial knocked out of them, like Sara. If life isn't smacking you around at the moment, you are actually in greater danger than Sara and John the night of the layoff. You are a real candidate for financial mediocrity or even a major crisis brought on by denial, and you have to see the need to make dramatic changes. If you are apathetic because everything seems "just fine," then you will be unwilling to make the huge changes needed to get huge results.

Mmm ... Frog Legs

Years ago, in a motivational seminar by the master, Zig Ziglar, I heard a story about how mediocrity will sneak up on you. The story goes that if you drop a frog into boiling water, he will sense the pain and immediately jump out. However, if you put a frog in room-temperature water, he will swim around happily, and as you gradually turn the water up to boiling, the frog will not sense the change. The frog is lured to his death by gradual change. We can lose our health, our fitness, and our wealth gradually, one day at a time. It might be a cliché, but that's because it is true: The enemy of "the best" is not "the worst." The enemy of "the best" is "just fine."

If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sin, and will heal their lan.... 2 Chronicles 7:14